GRASIM INDUSTRIES Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) AFTER noticing the contrary view taken in the case of Mafatlal Industries v. CCE reported in 2003 (57) RLT 578 and in the case of Electrolux Kelvinator Ltd v. CCE, Jaipur reported in 2004 (163) E.L.T. 395, the following issue has been referred to the Larger Bench: When the inputs on which credit has been availed are used for the manufacture of final products and if such final products are destroyed due to fire and such loss of finished goods has been adequately compensated by the Insurance (minus excise duty) is the attributable modvat credit (on such inputs) be reversed, when remission of duty is granted on the finished goods destroyed in fire/accident.

(2.) IN the case of Mafatlal Industries v. CCE reported in 2003 (57) RLT 578, the Tribunal held that in case finished goods were destroyed in fire, remission of duty has been granted, the modvat credit involved in the inputs utilized in the manufacture such finished goods, has to be reversed whereas the Tribunal in the case of Electrolux Kelvinator Ltd. v. CCE, Jaipur , after following the earlier decision in the case of Inalsa Ltd. v. CCE, New Delhi held that in case of remission of duty is granted in respect of the goods destroyed in fire, Modvat credit on such inputs used in the manufacture of goods need not be reversed. For ready reference, Rule 49 of Central Excise Rules, 1944 which provides for remission of duty is reproduced below: Rule 49 - Duty chargeable only on removal of goods from the factory premises or from an approved place of storage - (1) Payment of duty shall not be required in respect of excisable goods made in a factory until they are about to be issued out of the place or premises specified under Rule 9 or are about to be removed from a store -room or other place of storage approved by the Commissioner under Rule 47: Provided that the manufacturer shall on demand pay the duty leviable on any goods which are not accounted for in the manner specifically provided in these rules, or which are not shown to the satisfaction of the proper officer to have been lost or destroyed by the natural causes or by unavoidable accident during handling or storage in such store room or other approved premises: Provided further that the proper officer may not demand duty due on any goods claimed by the manufacturer as unfit for consumption or for marketing subject to such conditions as may be imposed by the Commissioner by order in writing.

(3.) AFTER introduction of new Central Excise Rules, 2002, Rule 21 of Rules is reproduced below: Rule 21 - Remission of duty. - Where it is shown to the satisfaction of the Commissioner that goods have been lost or destroyed by natural causes or by unavoidable accident or are claimed by the manufacturer as unfit for consumption or for marketing, at any time before removal, he may remit the duty payable on such goods, subject to such conditions as may be imposed by him by order in writing.